JAPANESE YEN RETREATS SHARPLY AS BOJ CONCERNS REMAIN

US stocks rose on Tuesday even after the hawkish statement from Jerome Powell on Monday. The Dow Jones rose by over 250 points while the Nasdaq 100 index added about 300 points. On Monday, Powell said that he will support a more hawkish stance in the coming meeting in a bid to deal with the rising inflation. He added that the bank would consider hiking interest rates by about 0.50%. This means that the bank will be the most hawkish it has been in years. The best performing asset was financials as companies like Goldman Sachs and Morgan Stanley rose by over 1%. Technology companies like Meta, Bakkt, Alibaba, and BigCommerce were among the best performers.

The British pound rebounded in the overnight session ahead of the upcoming UK consumer price index (CPI) data. Economists expect the numbers to show that the headline CPI rose from 5.5% in January to 5.9% in February. They also expect that the core CPI, which excludes the volatile food and energy products rose from 4.4% to 5.0% in the same period. If they are correct, these will be the highest inflation numbers in decades. The producer price index is also expected to have held steady as the cost of doing business rose. These numbers will come a week after the Bank of England (BOE) hiked interest rates by 0.25%.

The economic calendar will have some key events on Wednesday. The Bank of England (BOE) governor will deliver his first speech since the bank made its interest rate decision. Governor Powell will talk although his statement is unlikely to move the US dollar as it did on Monday. The US will also publish the latest new home sales numbers. Economists expect the data to show that the country’s new home sales rose by over 810k even as prices jumped. The Energy Information Administration will publish the latest inventories numbers.

GBPUSD

The GBPUSD pair rebounded in the overnight session ahead of the upcoming important UK inflation data. It is trading at 1.3247, which is significantly higher than Tuesday’s low of 1.3185. On the four-hour chart, it has formed an inverted head and shoulders pattern, which is also a bullish signal. It has also moved above the 25-day and 50-day moving averages. Therefore, the pair will likely keep rising as bulls target the next key resistance at 1.3250.

EURUSD

The EURUSD pair was also little changed as investors reacted to the statement by the Fed Chair. It is trading at 1.1017, where it has been in the past few days. It is slightly above the lower side of the triangle pattern. Also, the 25-day moving average has flattened while the Relative Strength Index is at a neutral level. Therefore, the pair will likely remain in this range today.

EURJPY

The EURJPY pair jumped to the highest point in months as the divergence between the ECB and BOJ widened. It is trading at 132.95, which is significantly higher than this year’s low of 124.42. It has moved above the 25-day and 50-day moving averages while the Relative Strength Index has moved above the overbought level. Therefore, the pair will likely maintain a bullish trend in the near term.